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Category > Business & Finance Posted 13 Feb 2019 My Price 5.00

McCormick & Company is considering a project that requires an initial investment of $24 million to build a new plant and purchase equipment

McCormick & Company is considering a project that requires an initial investment of $24 million to build a new plant and purchase equipment. The investment will be depreciated as a modified accelerated cost recovery system (MACRS) seven-year class asset. The new plant will be built on some of the company's land, which has a current, after-tax market value of $4.3 million. The company will produce bulk units at a cost of $130 each and will sell them for $420 each. There are annual fixed costs of $500 thousand. Unit sales are expected to be $150,000 each year for the next six years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $8 million (before tax) and the land is expected to be worth $5.4 million (after tax). To supplement the production process, the company will need to purchase $1 million worth of inventory. That inventory will be depleted during the final year of the project. The company has $100 million of debt outstanding with a yield to maturity of 8 percent, and has $150 million of equity outstanding with a beta of 0.9. The expected market return is 13 percent, and the risk-free rate is 5 percent. The company's marginal tax rate is 40 percent. What is the WACC of the company? Compute the depreciation table What is the after-tax salvage value? What is the After-tax cash flow of the project? What is the NPV of the project? What is the IRR of the project?         

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SmartExpert
(118)
Status NEW Posted 13 Feb 2019 06:02 AM My Price 5.00

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Attachments

file 1550039320-McCormick Company.xlsx preview (316 words )
Mc-----------Cor-----------mic-----------k &-----------amp-----------;am-----------p; -----------Com-----------pan-----------y i-----------s c-----------ons-----------ide-----------rin-----------g a----------- pr-----------oje-----------ct -----------tha-----------t r-----------equ-----------ire-----------s a-----------n i-----------nit-----------ial----------- in-----------ves-----------tme-----------nt -----------of -----------$24----------- mi-----------lli-----------on -----------to -----------bui-----------ld -----------a n-----------ew -----------pla-----------nt -----------and----------- pu-----------rch-----------ase----------- eq-----------uip-----------men-----------t. -----------The----------- in-----------ves-----------tme-----------nt -----------wil-----------l b-----------e d-----------epr-----------eci-----------ate-----------d a-----------s a----------- mo-----------dif-----------ied----------- ac-----------cel-----------era-----------ted----------- co-----------st -----------rec-----------ove-----------ry -----------sys-----------tem----------- (M-----------ACR-----------S) -----------sev-----------en------------yea-----------r c-----------las-----------s a-----------sse-----------t. -----------The----------- ne-----------w p-----------lan-----------t w-----------ill----------- be----------- bu-----------ilt----------- on----------- so-----------me -----------of -----------the----------- co-----------mpa-----------ny'-----------s l-----------and-----------, w-----------hic-----------h h-----------as -----------a c-----------urr-----------ent-----------, a-----------fte-----------r-t-----------ax -----------mar-----------ket----------- va-----------lue----------- of----------- $4-----------.3 -----------mil-----------lio-----------n. -----------The----------- co-----------mpa-----------ny -----------wil-----------l p-----------rod-----------uce----------- bu-----------lk -----------uni-----------ts -----------at -----------a c-----------ost-----------
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